United States v. Avenatti
| Docket Number | 21-1778(L),22-351(CON) |
| Decision Date | 30 August 2023 |
| Parties | United States of America, Appellee, v. Michael Avenatti, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Second Circuit |
ARGUED: JANUARY 19, 2023
On appeal from a judgment of conviction entered in the Southern District of New York (Gardephe, J.), defendant, a California-licensed attorney, challenges (1) the sufficiency of the evidence supporting his conviction for transmitting extortionate communications in interstate commerce to sportswear leader Nike, see 18 U.S.C. § 875(d); attempted Hobbs Act extortion of Nike, see id. § 1951; and honest-services wire fraud of the client whom defendant was purportedly representing in negotiations with Nike, see id. §§ 1343, 1346. Defendant further challenges (2) the trial court's jury instruction as to honest-services fraud, and (3) the legality of a $259,800.50 restitution award to Nike.
DANIEL HABIB, Appeals Bureau, Federal Defenders of New York, Inc. New York, NY, for Defendant-Appellant.
MATTHEW D. PODOLSKY, Assistant United States Attorney (Daniel C. Richenthal, Robert B. Sobelman, Danielle R. Sassoon, Assistant United States Attorneys, on the brief), for Damian Williams, United States Attorney for the Southern District of New York, New York, NY, for Appellee.
Before: WALKER, RAGGI, and PARK, Circuit Judges.
Attorney Michael Avenatti appeals from an amended judgment of conviction entered on February 18, 2022, in the United States District Court for the Southern District of New York (Paul G Gardephe, Judge), after a jury found Avenatti guilty of transmitting extortionate communications in interstate commerce, see 18 U.S.C. § 875(d) (Count One); attempted Hobbs Act extortion, see id. § 1951 (Count Two); and honest-services wire fraud, see id. §§ 1343, 1346 (Count Three). Sentenced, inter alia, to an aggregate prison term of 30 months and ordered to pay $259,800.50 in restitution under the Mandatory Victims Restitution Act of 1996 ("MVRA"), id. §§ 3663A, 3664, Avenatti challenges (1) the sufficiency of the evidence supporting each count of conviction, (2) the trial court's failure to give his requested jury instruction as to honest-services fraud, and (3) the legality of the restitution order. Because none of these challenges has merit, we affirm the judgment of conviction.
The crimes of conviction took place in March 2019 while Avenatti was representing Los Angeles youth sports coach Gary Franklin in negotiations with sportswear leader Nike.[1] Critical to the two extortion crimes was Avenatti's threat to cause Nike reputational and financial injury if it did not pay him millions of dollars. Critical to the fraud crime was a scheme to deprive Franklin of Avenatti's honest legal services in negotiations with Nike by (unbeknownst to Franklin) conditioning a settlement with Franklin on Avenatti's own receipt of a solicited multi-million-dollar bribe. Because Avenatti argues that the trial evidence was insufficient to support conviction on any of these crimes, we recount that evidence in some detail and in the light most favorable to the prosecution. See United States v. Raniere, 55 F.4th 354, 364 (2d Cir. 2022).
Prosecution witness Franklin was the founder and program director of California Supreme ("Cal Supreme"), a nonprofit youthbasketball organization. For many years, Franklin himself coached Cal Supreme's premier age-17-and-under team, a number of whose members went on to play for college and professional basketball teams.
Sometime in 2006-2007, Nike began sponsoring Cal Supreme, providing approximately $192,000 in annual support and affording access to Nike's Elite Youth Basketball League.[2] According to Franklin, about a decade into this relationship, Nike employees Jamal James and Carlton DeBose directed him to pay additional Nike money to certain players' parents and handlers and to conceal those payments with false invoices. Franklin also accused James and DeBose of bullying him to step down from his coaching role with Cal Supreme in favor of a player's parent.
As a result of these events, in February 2018, Franklin sought advice from Jeffrey Auerbach, an entertainment industry consultant whose son had played on a Cal Supreme team. When, in September 2018, Nike stopped sponsoring Cal Supreme altogether, Franklin asked Auerbach for help getting the sponsorship renewed. Auerbach testified that he told Franklin that the payments he had been directed to make were similar to payments that had resulted in the conviction of an Adidas executive in the Southern District of New York.[3]
The following year, on February 6, 2019, Auerbach contacted a Nike executive whom he knew to pursue Franklin's complaints. When the executive told Auerbach that he would have to discuss the matter with Nike's outside counsel, Boies Schiller Flexner LLP ("Boies Schiller"), Auerbach and Franklin decided that they too needed the assistance of an attorney.
On February 28, 2019, Auerbach, on Franklin's behalf, contacted Michael Avenatti, a California-licensed attorney. Auerbach told Avenatti that Nike employees James and DeBose had "abused and bullied" Franklin to make payments to players' families, that Franklin "felt really terribly about it," and that he wanted to "report it to Nike" and "go with them [i.e., Nike] to the authorities." Trial Tr. 715. Auerbach stated that Franklin also "wanted to reestablish his relationship with Nike," but that "above all" he wanted "justice," which to Franklin meant making sure James and DeBose "did not hurt any other coaches and program directors." Id. Auerbach testified that he did not raise the possibility of either an internal investigation or a press conference with Avenatti, deeming the former unnecessary because Franklin "knew what happened," and the latter "damaging and detrimental to reaching [Franklin's] goals." Id. at 717-18.
Avenatti met with Franklin and Auerbach on March 5, 2019.[4]The two men explained to Avenatti Franklin's concerns with Nike's withdrawn sponsorship of Cal Supreme and showed Avenatti documents-including bank statements, text messages, and emails- that detailed payments that Franklin had made to certain players' parents and handlers at James's and DeBose's direction. Franklin testified that he considered the documents confidential and never gave Avenatti permission to publicize them. At the March 5 meeting, Auerbach and Franklin also both detailed the "justice" that Franklin was seeking: (1) to reestablish a sponsorship relationship with Nike, (2) to resume coaching his former team, (3) to have James and DeBose fired, (4) to receive whistleblower protection, and (5) to be paid some sort of compensation by Nike. Franklin emphasized that maintaining a relationship with Nike was important to him and that again coaching his former team was "the most important thing." Id. at 1542. While Auerbach referenced Franklin's desire to report misconduct "to the government . . . with Nike," neither he, Franklin, nor Avenatti mentioned the possibility of public disclosure or any internal investigation at Nike. Id. at 730.
Although no retainer agreement was entered into on March 5 (or at any time thereafter), Avenatti signaled to Franklin that he would serve as his lawyer, instructing Franklin "not [to] speak" to the FBI or to any official or person who might approach him but, rather, to "tell them to talk to your attorney." Id. at 742. Avenatti also told Franklin, "we're going to get you justice," and "we need to get you immunity." Id.
In March 2019, Avenatti's financial situation was precarious. Evidence showed that outstanding judgments against him totaled approximately $11 million, and that in November 2018, his law firm had been evicted from its Los Angeles office for non-payment of rent. Sometime in the period March 15-25, 2019, Avenatti's office manager recalled him saying that he was working on something that could allow him to "clear the deck of what was owed and start a new firm." Id. at 1405-06. Avenatti said "something having to do with an inhouse or internal investigation," but she could not remember the particulars. Id. at 1406.
As the following trial evidence showed, what Avenatti was working on in mid-March 2019 was a scheme to use an internal investigation retainer agreement as the vehicle for extorting millions of dollars from Nike to his own benefit and in breach of the fiduciary duty he owed Franklin.
On March 12, 2019, Geragos contacted a Nike attorney to request a meeting for Avenatti. When Geragos advised Avenatti that the Nike attorney had referred him to Boies Schiller, Avenatti's response revealed that he had already identified an internal investigation and a threat of public disclosure as crucial to his negotiations with Nike. In a March 13 text message, he instructed Geragos to insist on dealing directly with Nike because Boies Schiller would "never step aside and allow [Avenatti and Geragos] to run an investigation" at Nike. Id. at 1858; Gov't Ex. 103B. In a March 14 text message, Avenatti asked for a status report on "Nike and whether I need to start arranging my presser," i.e., press conference. Trial Tr. 1858-59; Gov't Ex. 103C.
Also on March 13, 2019, Boies Schiller partner (and prosecution witness) Scott Wilson called Geragos to inquire as to the subject of the requested meeting. Geragos told him the matter "was too sensitive to discuss over the phone," but "suggested that Nike might have an Adidas problem." Trial Tr. 203-04. The men agreed to meet in New York on March 19,...
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